By Jason Williams, Financial Analyst


The Smithsonian in Washington DC opened an exhibit titled “American Enterprise” on July 1st of this year. The exhibit is the first of its kind at the Smithsonian and makes an attempt to chronicle some of the history of American business over that last two hundred years. At the roots of this exhibit, the idea is put forth that Americans have held to an idea that free commerce and economic opportunity have gone hand in hand with democracy. As a result, the exhibit asserts that for the most part Americans have been tolerant to the excesses of capitalism and to the phenomenal wealth that has been created for a select few as long as our country protects equal access to all Americans. Also addressed in the “American Enterprise” exhibit, there are some notable exceptions to unfettered business when politicians, consumers, and voters agreed that American capitalism needed reform. Anti-trust legislation, organized labor laws, and consumer protection laws are all examples.

A recent article in The Economist points out a startling statistic… that the top 25 hedge fund managers in America make more money than all of the kindergarten teachers in the country combined.1 The great recession that we experienced in 2008 has had several consequences. Truth be told there are several more consequences that we won’t fully understand for years to come. But the data that is available in 2015 addressing the growth in income for the middle class shows serious stagnation. According to data published by the Bureau of Labor, hourly wages have not kept up with inflation. Wage data going back to 1972 show that annual purchasing power from income earned for most Americans has actually decreased significantly. In 1972 weekly wages for hourly employees averaged $829. Taking inflation as measured by the CPI into account the average weekly wage for hourly employees in 2015 is estimated at $705.2 This is a 14.9% decrease in hourly wage purchasing power over that last 40 years.

In addition to a significant widening of the income gap between the richest Americans and middle class Americans, another of the consequences of the great recession is that the biggest banks in America got even bigger. The largest bank in America is now roughly ten times bigger than the tenth largest bank. The top fifty largest banks completely dwarf the remaining banks in terms of market share of deposits and assets.3

I believe that there are several reasons to cheer for the success of Americas credit unions. U.S. News and World Report in the article “7 Ways Credit Unions are Better than Banks” detailed that credit unions are, among other things, helping the middle class in America by providing lower-cost access to loans, lower fee financial transactions, and competitive deposit rates on savings and deposits.4 It can be asserted that middle class Americans are getting squeezed and that credit unions are providing more help than other financial institutions to help them succeed. There has been much written about the widening of the income gap in America. Whether there comes another time that politicians, consumers, and voters decide to address reform and equal access in our capitalist free market again I will leave to others.

In the meantime, at Mark H. Smith, Inc. we work hard towards the success of credit unions. We want to see credit unions succeed by providing usable data and analytics to assist our clients in making great decisions.

1The Economist, June 27, 2015: “Capitalism in America” pg. 26